Monday, 2 September 2013

Yen Falls as Abe Gets Sales Tax Backing; Aussie Climbs

By Mariko Ishikawa & Masaki Kondo - Sep 1, 2013 10:49 PM PT
The yen fell against all of its major peers after speculators added to bearish bets on the currency and on signs Japan’s prime minister is making progress on policies that have helped weaken the currency.
The yen slid from a two-week high against the euro as Shinzo Abe got backing for a sales-taxincrease from panels that urged an increase in stimulus to cushion the economic blow.Australia’s dollar gained after a Chinese factory gauge rose to a 16-month high, boosting trade prospects.
Sept. 2 (Bloomberg) -- Peter Rosenstreich, chief foreign-exchange strategist at Swissquote, talks about the outlook for the Brazilian real versus the yen. He spoke Aug. 30 in London. (Source: Bloomberg)
Sept. 2 (Bloomberg) -- Timothy Riddell, Singapore-based head of global markets research at Australia & New Zealand Banking Group Ltd., talks about the economic outlook for India, Indonesia and China. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
“I expect a sales-tax hike to sustain optimism toward Abenomics, resulting in a weaker yen,” said Kengo Suzuki, the chief currency strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-biggest bank, referring to Abe’s economic policies. “For Japan’s monetary, fiscal and growth policies to be properly executed, a higher levy is needed, and an increase in the sales tax can be seen as the key to these three arrows of Abenomics.”
The yen lost 0.4 percent to 98.60 per dollar as of 6:48 a.m. inLondon from the end of last week, when it capped a 0.6 percent weekly gain. Japan’s currency weakened 0.4 percent to 130.28 per euro from Aug. 30, when it reached 129.31, the strongest since Aug. 20.
The euro slid 0.1 percent to $1.3214. The Aussie dollar gained 0.8 percent to 89.69 U.S. cents.
The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 other major currencies, rose 0.1 percent to 1,034.28 on Aug. 30, capping a 0.8 percent monthly increase that was the most since May. U.S. financial markets will be shut today for Labor Day.

Sales Tax

Prime Minister Abe is trying to sustain an economic recovery driven by fiscal and monetary stimulus as he moves on to tackling changes such as deregulation needed for a longer-term revival in Japan.
A majority of those in seven consultative panels favored proceeding with an increase of the 5 percent sales tax in April, Economy Minister Akira Amari told reporters on Aug. 31 after the final group met. Members of the panels, which were set up by the government, called for “sufficient stimulus,” he said.
Abe said today he’ll make a decision on the tax this autumn, taking the opinions of the panels into account.
Japanese companies’ capital spending was unchanged in the second quarter from a year earlier, a Ministry of Finance report showed today. The median forecast in a survey of economists by Bloomberg News was for a 2.1 percent decline. The Bank of Japan will start a two-day meeting on Sept. 4.

Bearish Bets

Traders increased bets the yen will weaken, according to data from the Commodity Futures Trading Commission. The difference in the number of wagers by hedge funds and other large speculators on a decline in the currency compared with those on a gain -- so-called net shorts -- was 78,353 on Aug. 27, compared with 71,721 a week earlier.
In China, the Purchasing Managers’ Index of manufacturing rose to 51.0 last month, the highest since April 2012, the National Bureau of Statistics and China Federation of Logistics said in Beijing yesterday.
HSBC Holdings Plc and Markit Economics’ PMI (EC11CHPM) for China rose to 50.1 last month from 47.7 in July, final readings released today showed. A reading above 50 indicates growth. China is Australia’s biggest trading partner.
China’s economy is looking solid and that’s very good news for global growth,” supporting risk appetite, said Mizuho’s Suzuki.
The MSCI Asia Pacific Index of stocks climbed 0.9 percent.

Fed Tapering

In the U.S., Federal Reserve policy makers are debating whether the economy is strong enough to allow them to pare monthly purchases of $85 billion in Treasuries and mortgage debt, which tend to debase the dollar. Officials will reduce the amount at their next meeting on Sept. 17-18, according to 65 percent of economists in an Aug. 9-13 Bloomberg survey.
The Institute for Supply Management’s manufacturing index in the U.S. probably was at 54 in August, compared with 55.4 in July, according to the median estimate of economists surveyed by Bloomberg News before the data tomorrow.
The dollar will rise to 103 yen and $1.28 per euro by the end of the year, analysts in Bloomberg surveys forecast.
“We’re pretty comfortable with dollar-yen at 105 in a year’s time,” said Singapore-based Nick Verdi, a currency strategist in Singapore at Barclays Plc. “What everybody is pinning their hopes on is a U.S.-led recovery.”
Losses in the 17-nation euro were limited before data forecast to confirm manufacturing in the currency bloc expanded at the fastest pace in more than two years.
final reading on a manufacturing index by Markit Economics based on a survey of purchasing managers will confirm an increase to 51.3 in August, the highest since June 2011, according to analysts surveyed by Bloomberg.
The European Central Bank will set monetary policy on Sept. 5. ECB policy makers are forecast to keep interest rates unchanged at 0.5 percent, according to the median estimate of economists.
To contact the reporters on this story: Mariko Ishikawa in Tokyo at; Masaki Kondo in Singapore at
To contact the editor responsible for this story: Rocky Swift at